Productivity Trends in Manufacturing
Implications for Employment Planning
B.S. Prakash

Using the data on the organised and the unorganised manufacturing sectors, the paper presents the productivity trends in Indian manufacturing for the period 1985-2001. Taking a composite view of the total manufacturing sector, the paper identifies 6 (out of 13) industry groups that have registered positive TFP growths during the period 1985-2001. The six industries are: miscellaneous industries group comprising repair services, recycling, etc. (2.7 per cent), textiles (2.3 per cent), basic metals (1.8 per cent), non-metallic (0.9 per cent), leather (0.8 per cent) and chemicals (0.3 per cent). Further, identifying some areas requiring improvement in data collection/publication, the paper suggests some policy initiatives required for increasing the share of manufacturing sector employment in the total employment of the country.

The author is Reader (Economics), Indira Gandhi National Open University, New Delhi.
Email: bagurprakash1234@yahoo.co.in 

 

The Relationship between Health Status and
Healthcare Expenditure in a Developing Hill Economy
An Econometric Approach
Krishan K. Kaushik, Kurt K. Klein,
Lawrence N. Arbenser and Anupama Tandon

This paper examines the relationship between health status, expenditure on health and education and per capita income, using data for the period 1971-2001 for Himachal Pradesh. The study uses Johansen’s methodology to test the existence and uniqueness of cointegrating vectors among the I(1) variables. The results suggest the lack of a long-run relationship between the variables. Health expenditure is an important determinant of better health status, and is therefore a key tool available to policy makers.

Krishan K. Kaushik is Professor, Himachal Pradesh University, Shimla and University of Lethbridge, Alberta, Canada.
Email: Krishan.Kaushik@uleth.ca 
Kurt K. Klein is Professor, University of Lethbridge, Alberta, Canada.
Email: klein@uleth.ca 
Lawrence N. Arbenser is Professor, University of Lethbridge, Alberta, Canada.
Email: lawrence.arbenser@uleth.ca 
Anupama Tandon is Assistant Professor, St. Bede's College, Shimla.
Email: anujshimla@indiatimes.com 
 

Export Competitiveness of Pulses in India
A Case Study of Chickpea
Pushpa M. Savadatti

Trade in agricultural products can play an important role in promoting economic development especially of economies like India. Agricultural exports have been the backbone of India’s export efforts. Trade in pulses is an important component of international trade. Producers and consumers may benefit from expanded domestic and international trade in pulses. The present study attempts a structured exploration of export markets for an important pulse crop grown in India, namely chickpea (gram). The present analyses have used analytical techniques like, Nominal Protection Coefficient (NPC) to study the export competitiveness of the commodity, Markov Chain Analysis to analyse the direction and changing pattern of trade, and cointegration technique to assess the market integration between two prices of the same commodity in spatially separated markets. It emerges from our results on NPC under exportable hypothesis that chickpea is highly export competitive. The value of the estimated average NPC was around 0.50, indicating that Indian gram enjoys advantage in exports. The results of Markov chain analysis have indicated that gram has potential markets. UK, USA, UAE and Saudi Arabia are the major importers of gram and will continue to be so in the near future also. The cointegration analysis reveals that domestic and international market prices of gram are well integrated indicating the competitive pricing behaviour. This implies that domestic market is responsive to changes in the international market prices and producers will benefit from the increase in the international market prices especially in the free trade regime. So it is necessary to devote more resources to gram crop and provide fillip to the export momentum by removing the constraints.

Pushpa M. Savadatti is Reader of, Department of Economics, Karnatak University, Dharwad.
Email: savadattipm@yahoo.co.in 
 

The Bonds that Impede
A Model of the Joint Evolution of Corruption and Apathy
Yanis Varoufakis

This paper discusses the joint evolution of corruption and public engagement in politics by means of a model combining psychological game theory with evolutionary game theory. Its contribution is to demonstrate that, while power corrupts and corruption undermines the legitimacy of power, the prospects for social and economic development may depend crucially on the evolution of an appropriate web of expectations, rather than on a powerful coercive mechanism that forces corruption underground. The theoretical results emphasise the context-specificity of corruption, explain resistance-to-corruption as a response to preferences inhabiting the ill-defined space between the walls separating one citizen from an ‘other’, and links the evolution of corruption to the evolution of public spiritedness and the reach of participatory politics

Yanis Varoufakis, Department of Economics, University of Athens, Greece.
Email: yanisv@econ.uoa.gr 
 

Policy Rules and Price Level Flexibility
An Historical Exploration
Terence C. Mills and Geoffrey E. Wood

This paper considers two aspects of the behaviour of output and prices during the Gold Standard. The first is the relationship between prices and output when prices are falling and the second is whether ‘large’ monetary fluctuations affected real output but ‘small’ ones did not. Models investigating these aspects are estimated using data from 1830 to 1913 for the UK and also, for comparison, for the US and France. It is found that changes in UK inflation affected output nonlinearly, with an increase in inflation occurring when inflation is below 3.3 per cent per annum inducing an increase in output, with the converse occurring if inflation increases from a level greater than 3.3 per cent. One-off steps in the price level had no output effects. These results are not found for France or the US and it is argued that this was because these countries had different monetary standards to the UK and hence had no anchor for price level expectations.

Terence C. Mills is Professor, Department of Economics, Loughborough University.
Geoffrey E. Wood is Professor, Faculty of Finance, City University Business School.
Email : g.e.wood@city.ac.uk
 

Banking on Deposit Mobilisation
Efficiency Pursuits of Indian Commercial Banks
H.P. Mahesh and Meenakshi Rajeev

While there are a number of studies measuring the efficiency levels pertaining to profit and cost aspects of commercial banks, there is little attempt to study the efficiency of commercial banks in one of the important activities viz., deposit mobilisation. Given deposit mobilisation as an important mandate after the nationalisation of banks, it is important to examine how efficiently commercial banks are carrying out this task. This paper attempts to measure the deposit efficiency of Indian commercial banks by using ‘stochastic frontier’ technique for the period 1985-2004. Our results show that, on average, Indian commercial banks are around 75 per cent efficient in producing deposits compared to the best performing bank within the sample. Public sector banks as a group, rank first in the deposit efficiency measures. Deregulation and resulting competition amongst the banks have significant impact on the deposit efficiency of Indian commercial banks.

H.P. Mahesh, PhD Fellow, Institute for Social and Economic Change, Nagarbhavi, Bangalore.
Email: maheshhp@yahoo.com 
Meenakshi Rajeev, Assistant Professor, Institute for Social Economic Change, Nagarbhavi, Bangalore.
Email: meenakshi@isec.ac.in 
 

Measuring Cost of Environmentally Sustainable
Industrial Development and Designing Pollution Taxes
A Case Study of Thermal Power Generation
M.N. Murty and S.C. Gulati

This paper provides a method of estimating the cost of environmentally sustainable thermal power generation. It describes the technology polluting firms as one of producing jointly good output and bad output. The data about thermal power generation in Andhra Pradesh (AP) state of India is used for the estimation. Estimates of shadow prices of pollutants and the cost of environmentally sustainable power generation are obtained. Also, this paper provides the estimates of pollution taxes needed to make the thermal power generating units in AP comply with the air pollution standards in India.

M.N. Murty, Institute of Economic Growth. Email: mnm@ieg.ernet.in 
S.C. Gulati, Institute of Economic Growth. Email: gulati@ieg.ernet.in 
 

The Relationship between Labour Unionisation and the
Number of Working Children in India
Nidhiya Menon

This paper analyses the link between labour unions and child work in India. We investigate how measures of unionisation such as the number and membership of worker’s unions, as well as education indicators, credit constraints, and other variables that capture a state’s ‘economic health’, influence the number of working children across the states of India. We account for the possible endogeneity of labour union variables in modeling the determinants of child labour. This is accomplished by using a state-specific fixed effects framework that captures the presence of unobservables, which may influence child labour and unionisation simultaneously. Results indicate that there is a strong positive association between the unionisation of labour and child work.
Controlling for other variables, more children work in states characterised by relatively large amounts of unionisation. This may be because ‘unionised’ states have a higher incidence of labour unrest, which leads to disruptions in household earnings. Poor households in such states thus need to rely on their children’s labour to supplement family income and consumption.

Assistant Professor, Department of Economics & IBS, Brandeis University, USA.
Email: nmenon@brandeis.edu 
 

CETPs and Pollution Control in Small Scale Industry in India
Rita Pandey and Saubhik Deb

Small scale industries in India have an important place in the economy as these provide substantial employment and value addition per unit of capital employed, besides earning significant amount of foreign exchange. However, they also create severe pollution problems. The enforcement of environmental regulation—mainly comprising command and control type of instrument—on small scale units has been highly unsatisfactory for a variety of technical, financial and political reasons. Using a game theoretic framework, this paper examines how common treatment of pollution can contribute to improving environmental compliance of small scale industries in a cost effective way for both the firms and the regulator. The paper demonstrates that common treatment of pollution is potentially a cost effective option in addressing the water pollution problem in small scale units; and drawing on the experience of operation of common effluent treatment plants (CETPs) in India, it identifies reasons for failure of some of the CETPs and suggests various changes, both regulatory and institutional, that should be effected for successful implementation of common effluent treatment facilities.

Dr. Rita Pandey, Senior Fellow, National Institute of Public Finance and Policy, New Delhi, India.
E-mail: rita@nipfp.org.in 

COMMUNICATIONS FOR DEBATE AND RESEARCH / 1

The Economic Contributions of Edmund Phelps: An Appreciation
Raghbendra Jha

Raghbendra Jha is Professor, Australia South Asia Research Centre, Research School of Pacific and Asian Studies, Australian National University, Canberra, Australia.
Email: r.jha@anu.edu.au 

COMMUNICATIONS FOR DEBATE AND RESEARCH / 2

The Measurement of Inequality, Concentration and Diversification
Fred E. Foldvary

The Lorenz curve and Gini coefficient are typically used to measure inequality. A different way to measure inequality is introduced here: I = CN, the product of concentration and number of units. The resultant index can be interpreted with reference to an inequality base where one unit owns all and the rest nothing. This inequality index also integrates the measurement of inequality, concentration, and diversification into one system, where diversification is measured as the inverse of concentration. I = CN accommodates various measures of concentration, including the Herfindahl-Hirschman and Tideman-Hall indexes. The Tideman-Hall concentration index also provides indexes of concentration, diversification and inequality as functions of Gini. As one application, the inequality index can be used to provide an index of economic development.

Fred E. Foldvary, Department of Economics, Santa Clara University, USA.
Email: ffoldvary@scu.edu 

BOOK REVIEW

Farm Size and Marketing Efficiency: Pre and Post-Liberalisation-- Parmod Kumar
(Concept Publishing Company, New Delhi, 2007, Price Rs 600, pp.xx + 284)

Reviewed by Dr. V.M. Rao, Institute for Social and Economic Change, Bangalore

Select New Publications

Indian Economy Since Independence
Edited by Uma Kapila
(Academic Foundation, New Delhi, 2006, Price : Rs 395, Paper back edition)

Sustainable Development and the Indian Economy: Issues and Challenges
Edited by Sailabala Debi and V.B. Annigeri
(Serial Publications, New Delhi, for Centre for Multidisciplinary Development Research, Karnataka , 2006, Price Rs. 995, pp.309)

Agricultural Diversification and Small Holders in South Asia
Edited by P.K. Joshi, Ashok Gulati and Ralph Cummings Jr
(Academic Foundation, 2007, Price: Rs 1195, pp. 624)